Tiny Indonesian firm Evergreen's $2.3 billion share issue plan raises eyebrows

By Eveline Danubrata

JAKARTA (Reuters) - Evergreen Invesco, a little known Indonesian textile materials trader with a small market value, said it plans to raise $2.3 billion in an equity rights issue, stoking speculation that it could be a precursor to a backdoor listing.

In what would be the Southeast Asian nation's biggest stock offering in eight years, PT Evergreen Invesco Tbk told the Jakarta stock exchange it seeks to raise about 30 trillion rupiah ($2.28 billion) by issuing up to 150 billion new shares to existing shareholders at an as yet undetermined price.

But for a company with a market value of just $67 million and sales of a tiny $7.9 million for the most recent six-month period, the targeted sum seemed outsized, analysts said.

Evergreen did not respond to requests for comment.

The company's total liabilities, at nearly 23 billion rupiah ($1.75 million) as of June, according to its latest financial statement, stood at a fraction of what it was seeking to raise.

"For a small company to do such a big rights issue, it normally indicates a change in business model or a backdoor listing," said Isnaputra Iskandar, Indonesia head of research at brokerage Maybank Kim Eng Securities.

In a backdoor listing, otherwise known as a reverse takeover, a privately-held company gains a listing status by acquiring a publicly traded company. It may also inject new assets into the company.

Evergreen said in the statement if its main shareholders do not subscribe to the offering, it will ask a third party, who may include its creditors, to act as a stand-by buyer. It did not identify the potential third-party buyer.

Natural Crystal Holding Inc, a private company based in the Virgin Islands, and First Venture Limited together own nearly 60 percent of Evergreen, according to Thomson Reuters data.

Members of the public who don't exercise their rights will see their shareholding diluted to 1.5 percent from 40.53 percent, the company added. The funds from the rights issue will be used to "fulfill our obligations", it said.

The company needs approvals from shareholders and the financial regulator for the rights issue.

Nurhaida, head of capital market supervision at Indonesia's financial services regulator, did not immediately respond when asked whether it will ask Evergreen to disclose more details.

Evergreen doesn't have an obligation yet to disclose the name of the stand-by buyer, Samsul Hidayat, a director at the Indonesian stock exchange, told Reuters, adding the company will provide detailed information after its shareholders meeting.

At $2.3 billion, Evergreen's offering would be the biggest equity fund-raising in Indonesia since PT Bakrie & Brothers Tbk raised $4.4 billion in 2008.

A Reuters calculation shows the rights shares will be priced at around 200 rupiah each, a 7 percent premium to the stock's 187 rupiah closing price on Friday, when Evergreen made the announcement.

Evergreen shares closed 1.6 percent lower at 184 rupiah on Tuesday, slightly underperforming the broader Jakarta stock exchange. The Indonesian stock market was closed on Monday for a public holiday.

($1 = 13,180.00 rupiah)

(Reporting by Eveline Danubrata in JAKARTA; Additional reporting by Elzio Barreto in HONG KONG and Cindy Silviana in JAKARTA; Editing by Muralikumar Anantharaman)